The Director General of the International Atomic Energy Agency says dialogue with North Korea and Iran is the only way to resolve disputes about their nuclear ambitions.

Mohamed ElBaradei says the international community must discard the idea that dialogue is appeasement or a reward for bad behavior.

"Dialogue is an essential tool to change behavior. Whether it is North Korea, whether it is Iran, whether it is a Palestinian issue," said ElBaradei. "In diplomacy, I feel that without a dialogue, you cannot move. You end up stereotyping. The other issue, of course, is that it has to be incremental, any solution. You know, these are so [such] complex issues that you have to go step by step by step and sequencing is a key."

Mr. ElBaradei calls the recent nuclear test by North Korea "inexcusable." But he says sanctions agreed upon by the U.N. Security Council are only one tool to deter countries with nuclear ambitions.

"Once you start applying penalties, it brings the hardliners in the driver's seat. I think sanctions, we need to understand that we need to use sanctions in a measured way to induce change of behavior," he added. "That means, in addition to sanctions, we need to also look for constructive engagement."

ElBaradei says without dialogue the risks grow.

"It becomes a more dangerous world because the technology has developed.

In the past, we used to rely on export control," continued ElBaradei. "Well, that is a good tool but it is not sufficient any longer. We know now that you have lots of these technologies on a CD Rom. Export control is really not sufficient. We really need to go to ask ourselves a question, why these countries are tempted to develop nuclear weapons, or chemical or biological?"

As for Iran, which the United States says wants to join North Korea in becoming a nuclear power, El Baradei says it is not yet clear if the Iranian government has embarked on that same path.

"I say that the jury is still out. I say that Iran has the knowledge to enrich uranium, there is no question about it," he noted. "We have not seen Iran developing the industrial capacity which enables them to have the required material to develop a weapon."

But ElBaradei says Iran is clearly in violation of international nuclear safeguards. He says Iran has not thoroughly reported its nuclear activities to the IAEA as required under the Nuclear Non-proliferation Treaty, which it signed.

Iranian President Mahmoud Ahmadinejad has said repeatedly he wants nuclear technology for peaceful purposes only.

The United States and its allies have demanded that Iran suspend uranium enrichment, a key step in developing nuclear arms, before negotiations can take place. Iran says there should be no preconditions for talks.

Despite the impasse, IAEA Director ElBaradei says, Iran would not be able to make a bomb until 2010 or 2015 which leaves plenty of time for negotiations on the nuclear issue.